Sceptics start to like CCA with fruit

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It's early days, but Coca-Cola Amatil chief executive Terry
Davis appears to have placated a sceptical market, after outlining
the reasons he is prepared to move outside the beverages sector by
bidding $500 million for fruit processor SPC Ardmona.

Mr Davis unveiled Amatil's $2.05-a-share cash bid on Friday,
saying the unexpected proposal would fit nicely with his expansion
plans. SPC shareholders have the option of choosing to receive
Amatil stock in an offer that equates to $2.12 to $2.19 a share

Mr Davis's rationale that SPC products such as tinned fruit,
baked beans and jam were ripe for growth and product innovation in
the hands of Amatil seemed to do the trick.

Amatil shares sank to $7.20 when the Sydney company confirmed it
would bid for SPC after two days of speculation, but improved
steadily during Mr Davis's presentation, finishing on Friday 10c
lower at $7.38.

"The acquisition of SPC Ardmona provides an opportunity for CCA
to complement its existing beverage business with leading brands in
the ready-to-eat packaged fruit sector," he said. "We have seen a
growing trend by Australian consumers to increasingly look for
health and wellbeing products".

SPC's board has recommended the bid, made via a scheme of
arrangement, with the offer to be put to a shareholder vote in late
January or early February. SPC shares closed 36c higher at
$2.14.

Dairy group National Foods walked away from merger talks with
SPC on Wednesday after deciding it needed to give shareholders time
to consider a $1.6 billion bid from New Zealand's Fonterra.

It is understood National Foods could not match some of parts of
Amatil's bid, which allows SPC shareholders to retain the group's
3c-a-share dividend.

Amatil has been pursuing growth outside the soft drink market by
buying up water and juice assets. But since its bid for market
leader Berri was knocked back by the competition regulator, the
company has been forced to look at other ways of expanding into
juice.

"Whilst Amatil has thus far been focused on beverages, SPC will
provide it with exposure to incremental, relatively high-growth and
nutrition-focused food categories and position them well within
these," Macquarie Equities told its clients.

SPC enjoys market leadership in the processed fruit category in
supermarkets and is No. 2 in canned baked beans and spaghetti.

Mr Davis said he would look at revamping SPC's packaging and
products in an attempt to lift sales and expand into markets, such
as fruit and vegetable juice and even fruit and yoghurt.